Icelandic Whaling : Show me the money

It's widely assumed by many people that Icelanders and other whaling nations want to go whaling in order to make money. I'm pretty sure that there are people in Iceland, Japan and Norway who think this too. So I set about working out whether there is profit in whaling - and how much that might be.

Here's what I've learned

To model a business you need to know a few things. What are you selling, who are you selling it to, what does it cost you to produce and how much can you sell at what price? Answer these questions and you're well on your way...

So what are they selling? Well whale meat. That one's easy.

Who are they selling it to?

Since trade in endangered species is illegal the primary market has to be Icelanders. Iceland and Japan have a deal with CITES that lets them trade Minke whale, but almost none has been traded because the Japanese already have too much. That just leaves Norway, but in common with every other whaling nation the Norweigans also have a surplus - so no chance of selling them anything either.

There are 300 000 icelanders. As you can see from this discussion thread somewhere between 1% and 25% are claimed to be willing to eat whale meat at least once a year. For the purposes of this model we'll go with the 25% number. That's 75 000 icelanders prepared to eat whale meat one or more times a year. As we'll see later though this number is rather optimistic.

The next bits of data I needed were about how much meat is actually on a whale and how much it costs to catch a whale. It was while looking for this data that I came across this excellent paper produced by IFAW and an Iceland Nature Conservation Association. The numbers though were provided by the Icelandic Fisheries Ministry, Icelandic supermarkets and the whalers themselves.

From these figures we learn that in 2003 36 Minke whales were caught, and produced 37 tonnes of meat. About 1 tonne per whale, which assuming average sized adult Minke's means about 25% of a whale is meat. Since a Fin whale weighs about 40 tonnes we could assume that it contributes 10-15 tonnes of meat if caught and butchered.

So, thirty Minkes plus nine big Fins gives us 165 tonnes of meat. 165 000 kilos. More than two kilos for every Icelander planning to eat whale meat this year. Sounds like a lot, but it's peanuts compared to the amount of meat Icelanders eat annually. The icelandic meat consumption, including lamb, beef and so on was 22 000 tonnes in 2003.

My model was coming along nicely at this stage, but here the report I was reading got really interesting. Here's what happened to those 37 tonnes of Minke whale they landed in 2003

"When the catch from the scientific whaling project entered the market in 2003 minke whale meat had not been generally available in Icelandic supermarkets for some 20 years. The catch was bought by Ferskar Kjötvörur hf., one of the main meat distributors in the country and sold mainly through Hagkaup hf., a leading supermarket chain. The product enjoyed considerable media attention, chefs were drafted to publish recipes and the product was introduced on television shows. The marketing campaign lasted approximately one month.

To start with sales were good and consumers were willing to try out the product but retailers say repeat sales scarcely took place. According to retailers’ estimates total sales amounted to 10-15 tonnes in 2003 which means 23-27 of the 37 tonnes that went into the market did not sell."

This sits badly with our estimate that 75000 icelanders want whale meat on a regular basis. It's about an eleventh of our projected demand. That would give us about 2.3% of Icelanders wanting to eat whales. But the report goes on

"The initial price was close to 1000 ISK/kg. In further efforts to market the meat price has gone as low as approximately 500 ISK/kg. Retailers believe price is not a determining factor in sales but the meat might still sell for 100-200 ISK/kg, which is well below the price of chicken."

One Icelandic Krona is about 1 euro cent. So whalemeat was initially priced at 10 euros a kilo, but even when the price was cut to half that it couldn't be sold. The bit about repeat sales scarcely ever taking place is interesting too. Backed by a huge marketing blitz a lot of folks tried it, but not many of them liked it enough to buy it again. Even with that big 50% discount.

This year Iceland is planning to land about 165 tonnes of whalemeat. Enough to meet demand for ten years. The three whales they've landed so far will keep Iceland's whale meat eating population going for at least two years (one of the whales may be unfit for consumption apparently).

The report then goes on in great detail into what it costs to produce a kilo of whale meat. The 2003 scientific whaling cost 43 mio ISK or about 430 000 Euros, about 15 000 Euros per whale. Assuming it costs no more to catch a Fin than a Minke this years hunt will come it at 565 000 Euros.

For just over half a million Euros the whalers will get to sell at most 15 tonnes of whale meat. Despite the price in store being 10 (or 5) Euros per kilo the whalers only got 3.5 Euros per Kilo in 2003 and a much lower 1.3 Euros per kilo in 2004. The rest gets taken up in shipping, storage, marketing, distribution and a margin for the supermarkets. So, a maximum of 15 000 tonnes will be sold at a cost of a maximum of 3.5 euros per kilo gives an income of 52 500 Euros, compared to a cost of 565 000 Euros. That's a loss of half a million Euros a year.

Ouch.

Of course the figures above don't include money the Icelandic government spends on whaling. It doesn't allow for the cost of storing 150 tonnes of unsold whale meat. It doesn't cover the fact that this years so called scientific whaling will also take around 30 Minke whales and that meat has got to go somewhere.

Now running a business at a loss isn't uncommon. But running a business at a loss *when you don't have to* is just plain crazy. If you were a whaler and you wanted to make money here's what you'd do. You'd sign a deal with someone to buy your whalemeat before you killed a whale. Then you'd kill just enough whales to fill the contract, and if things went well you'd move on to another contract, more whales and so on. The last thing you'd do is lumber yourself with 165 tonnes of whalemeat that you can't sell.

The only possible conclusions? Well either the whalers are extraordinarily bad businessmen, or they're treating this as a cold, wet and miserable bloodsport. They're playing at Captain Ahab and the whale, only this time the captain has an explosive harpoon and the whale hasn't got a chance.

Ummmm..
"Since trade in endangered species is illegal the primary market has to be Icelanders."
Incorrect Martin, both Japan and Iceland have reservations to various cetacean species, I suggest you correct your illegal comment as trade between the two countries would be in fact, Legal.

While I believe Iceland and Japan have a reservation for Minke whale they don't have them for any other species.
They also don't have a market. To date Iceland has only managed to export 1/2 a tonne of minke to the Faroe Islands and while they could import to Japan, as noted elsewhere in this blog there's no demand for import meat there.

Martin,
I don't know if I can agree that there is "no demand for import meat" in Japan.
Japan of course imports lots of Aussie and USA beef, so I don't see why consumers would be averse to Icelandic whale, once the product has been tested for levels of contaminant concentration.
Reports in the media in the last day or so have also indicated that Iceland is in negotiations with Japan to allow such a deal, as apparently Loftsson wants to export some meat to Japan.
As for consumption in general, I've just posted updated stockpile figures on my blog (click my name below to go straight there), and again outgoing stock volume was high - around 7 times the amount of meat that Loftsson has to offer in fact, and also more than the amount of JARPA II whale meat set aside for non-profit activity.
Unless Japan can see a political reason not to allow the import (I can't) I'm not sure why they would not allow it, as it seems the Japanese market is quite healthy and could easily absorb an extra 100 tonnes from Iceland.

While I believe Iceland and Japan have a reservation for Minke whale they don't have them for any other species.Once again Martin, incorrect - check the CITES website. Japan, Norway and Iceland have reservations to Fin whales. I suggest you correct your illegal comment as trade between the two countries would be in fact, Legal.
Lets see if this gets published this time ..

Once again David and George disingenuously fail to address the fact that the IWC can recommend an RMP and an RMS but any pro-commercial whaling nation can register a reservation to those restrictions and then legally ignore them.
Exactly as Japan, Norway and Iceland have already done by registering reservations to the CITES listing of nearly every endangered whale species. Which is why Iceland and Japan are hunting protected species this season.
There will be no 'sustainable' international whale market if the moratorium is overturned because Japan is the largest market in the world for seafood, it is also a market that has consistently put profits before sustainability. Japan was recently caught red handed ignoring its own Tuna quotas -
http://news.bbc.co.uk/1/hi/world/asia-pacific/6057576.stmJapan also buys over quota Tuna from other nation members of international commercial supervisory organisations like ICCAT and buys Tuna from countries which refuse to recognise international Tuna quotas.

hey my name is jake and im in the middle of coursework and exams right now, but i came across this website and started to read about it, i find it amazing that there was 37 tonnes of whale meat and 27 tonnes of it was wasted! I'm behind you and all organizations of stopping whale hunting all the way! I find it really cruel that on this other website and whale was hunted down and when they were sort of getting the meat and all that, they found an arrow that dated from the 1800's stuck in it's side!!!

What is the significance of 16-25 yr olds? I still don't understand this cooked off figure. I see it everywhere. 1% of icelanders eat whale once a week. 1% of Americans probably eat steak once at week. These statistics and figures are not whole and are only included for your one sided argument.